Retail sales have declined due to Covid. However, we expect a strong pick-up in sales as the impact of Covid weakens because of several factors. First, the growth in household bank deposits has remained strong; and second, the majority of national retail sales occur in a small subset of the country’s cities. These cities are better protected from income declines due to the lower share of service workers and the substantially higher disposable incomes there.
We use a breakdown of the retail sales data by geography and sector, which shows a much higher split between regions than most analysts realize, to explain our reasoning.
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